A few of the more than 100,000 people attending the International Builder's Show in 2020 take a peek at The Sequoia, one of several models available from the Genesis line of homes by Champion.
Texas continues to be a hot market for manufactured housing, with plenty of new homebuyers flowing into the state, and Skyline Champion Corporation has increased its presence in the Lone Star State with a new manufacturing facility in Navasota.
The 270,000 square-foot plant located in southeast Texas was acquired in June and the operation has been retooled. Hiring is underway, and the first production line will be operational this year. We anticipate opening a second line as the supply chain allows, while eventually growing the total operation to over 250 employees, becoming one of the largest employers in Navasota.
“We’re seeking employees looking to build a career with us… long-term team members that want to be a part of the Champion Homes family,” General Manager Scott Isom said.
Skyline Champion Corporation is the largest independent, publicly traded, factory-built housing company in North America and employs approximately 7,900 people. It operates 40 manufacturing facilities throughout the United States and western Canada.
In addition to building homes, the company operates a factory-direct retail business, Titan Factory Direct, with 18 retail locations spanning the southern United States, and Star Fleet Trucking, providing transportation services to the manufactured housing and other industries from several dispatch locations across the United States.
Skyline Champion sells manufactured homes, modular homes, ADUs, and park model RVs under more than a dozen brand names.
West Mersea Holiday Park, Essex, Oyster Island. Courtesy photo.
Michigan-based Company Enter UK Market with Leading Communities Platform
Sun Communities has announced its entry into a definitive agreement to acquire Park Holidays UK for approximately $1.3 billion.
Park Holidays is the second largest owner and operator of holiday communities in the UK, with 40 owned and operated communities and an additional two managed communities. The majority of the communities are located in highly desirable, seaside locations in the South of England, within a short drive of London and other affluent Southern UK cities. Park Holidays represents a natural extension of Sun’s existing businesses and portfolio, complements Sun’s strategy and areas of expertise, diversifies its geographic presence, and is expected to generate resilient cash flows.
Park Holidays’ experienced operating team, led by CEO Jeff Sills, will continue to run day-to-day operations under Sun’s ownership.
The UK community owner has a proven ability to source and execute both internal expansion and external growth opportunities. Park Holidays primarily rents sites for owner-occupied vacation homes on annual contracts, as well as sells vacation homes to new customers. The acquisition, which is expected to be accretive to 2022 Core FFO per share, will represent approximately 7% of the Company’s properties and 8% of its total pro forma real estate asset value.
“We are incredibly excited to expand Sun’s footprint into the UK by acquiring Park Holidays, which allows us to leverage our land lease community expertise in a growing market. This transaction provides Sun with immediate scale in the UK as well as a platform for future growth in a fragmented landscape. We have completed significant strategy and research work in the UK with advisers prior to this opportunity, and feel confident that its long-term macroeconomic stability and fundamentals make the UK a very favorable destination in which to expand the Sun Communities platform internationally,” Sun Communities Chairman and CEO Gary A. Shiffman said. “Park Holidays has many parallels with Sun, such as its strong portfolio, its focus on growth, and a management approach that is consistent with ours. Under the leadership of Jeff Sills and his highly experienced senior management team, who have led the company since 2006, Park Holidays has created a strong brand given the quality of its assets and stellar customer service. Its management team has a proven track record of acquiring and expanding properties, efficiently integrating them into the platform, and creating significant value in a short period of time.”
John B. McLaren is Sun Communities President and COO.
“As we performed our diligence and underwriting processes, we were thrilled to discover how similar our MH and RV business models are to Park Holidays’ operations and expect to apply our deep expertise to this new market and thereby accelerate our growth,” he said. “Overall, the holiday park sector in the UK is an overwhelmingly domestic market and very similar to both the MH and RV industries in the U.S.
There are several compelling tailwinds that make us excited to enter the UK market as it has demonstrated consistent, steady growth through economic cycles and is currently benefiting from a rising interest in premium outdoor vacations and second home purchases as well as a number of high barriers to entry given limited land availability and zoning restrictions,” McLaren added. “Over time, we intend to use this platform to continue to scale in the UK market, just as we have successfully done in the U.S.”
The UK holiday park industry is an approximately $3.7 billion market that has demonstrated resilient growth through previous economic cycles. As in the US, it has benefited from robust growth in demand for domestic outdoor holidays which has been further accelerated by Brexit and COVID. According to industry sources, the UK holiday parks market is expected to see a compounded annual growth of approximately 8% from 2019 to 2021 and approximately 6% from 2021 to 2025. The UK market is highly fragmented and prime for consolidation over time, as platforms with 10 or more properties account for only about 7% of total properties.
“Joining Sun is an exciting new chapter for Park Holidays as we seek to continue to execute on a well-established and proven strategy to drive organic and inorganic growth. Our companies have a lot in common as we both strive to achieve the best experience for our customers and colleagues, and we are excited by the opportunity to work and collaborate with the Sun team. Our business has delivered strong and consistent growth through economic cycles, as we have built a unique portfolio of well-located assets and a sustainable and diversified business model with industry-leading operating metrics. By joining Sun, we plan to continue to consolidate a fragmented industry and provide the Park Holidays experience to an expanding customer base,” said Jeff Sills, Park Holidays CEO.
For the 12 months ended Sept. 30, 2021, Park Holidays generated $54.84 million in earnings before tax, interest, depreciation, and amortization.
The transaction values Park Holidays UK at an enterprise value of approximately $1.3 million. The selling shareholders will receive Sun fcommon stock equal to approximately $34 million, and the remainder of consideration will be in cash. In connection with the acquisition, the company entered into a commitment letter with Citigroup Global Markets Inc. to lend more than $1.2 million under a new senior unsecured bridge loan to fund the cash portion of the acquisition. The transaction is subject to a required regulatory approval, and is expected to close in the first quarter of 2022.
Manufactured housing community JLT Market Reports from Datacomp for November 2021 mobile home rent comps, occupancy, and other vital data from Idaho, Minnesota, Oregon, and Washington are now available for purchase and immediate download.
JLT Market Reports provide detailed research and information on communities in 187 housing markets throughout the United States. These include the latest rent trends and statistics, marketing programs, and a variety of other useful management insights.
Datacomp maintains and provides the JLT Market Reports and is the nation’s #1 provider of market data for the manufactured housing industry. JLT Market Reports are recognized as the industry standard for manufactured home community market analysis.
The November 2021 manufactured housing market data published in JLT Market Reports for Idaho, Minnesota, Oregon, and Washington include information from 10 markets on 294 “All ages” and “55+” manufactured home communities.
Altogether, the reports from the four states’ manufactured home communities include data representations for 51,026 homesites.
Regional Trends in Manufactured Housing Community Rent
Midwest region manufactured home communities show a year-over-year 3% increase in rent and a 1.6% increase in occupancy.
Pacific region manufactured home communities show a year-over-year 3.4% increase in rent and a 0.4% increase in occupancy.
West region manufactured home communities show a year-over-year 4.3% increase in rent and a 0.8% increase in occupancy.
“Data derived from the November 2021 JLT Market Reports shows a considerable amount of stability year over year. Some markets in the west may be showing the beginning of some inflationary pressure, likely a mix of market reactions to monetary policy, adjustments from the expiration of eviction moratoriums, and continued pipeline disruptions with material cost increases,” Datacomp Co-President and Chief Business Development Officer Darren Krolewski said.
What’s in JLT Market Reports?
Each JLT manufactured home community rent and occupancy report from Datacomp has detailed information about investment grade communities in the major markets. The detailed information includes:
Number of homesites
Occupancy rates
Average community rents, and increases
Oregon rent control and next increase data
Community amenities
Vacant lots
Repossessed and inventory homes, and much more
JLT Market Reports also include management insights that rank communities by the number of homesites, occupancy rates, and highest to lowest rents. Established reports show trends in each market with a comparison of November 2021 rents and occupancy rates to November 2020, as well as a historical recap of rents and occupancy from 1996 to the present date in most markets.
The November 2021 JLT Market Reports for Idaho, Minnesota, Oregon, and Washington manufactured home communities are available for purchase and immediate download online at the Datacomp JLT Market Report website, or they may be ordered by phone in electronic or printed editions at (800) 588-5426.
Each fully updated report for mobile home communities is a comprehensive look at investment grade properties within a market, enabling owners and managers, lenders, appraisers, brokers, and other organizations to effectively benchmark those communities and make informed business decisions.
Energy efficiency is a strong point for manufactured homes, particularly homes built during the last dozen years. Nearly every builder of HUD-code homes has improved its standard energy efficiency and rolled out myriad options for products that help with sustainability in energy transfer and cost reduction.
Manufactured home builders pack every bit of R-value they can into a home, knowing it will be a prime tool in marketing the homes because it will help reduce monthly costs for the buyer.
Our builders hit the mark on efficient housing, including when it comes to energy, from the way materials are shipped and stored to a manufacturing facility, to efficiencies on the line, and the quality of products used within well-designed floorplans.
A 2021 model home from Cavco Industries.
Department of Energy Conservation Standards for Manufactured Housing
Manufactured housing industry leaders have found a unified voice in helping policymakers in Washington, D.C., to understand that the energy efficiency standard being discussed would be counterproductive for factory-built homes, and would impede the availability of affordable homes going to market.
The Manufactured Housing Institute, in responding to the energy department and garnering support to oppose the changes, is quick to point out that the industry supports energy efficiency. The problem lies in how the department proposes to implement those efficiencies.
“The current DOE proposal is fundamentally flawed and must be completely rewritten to ensure manufactured homes remain an available option for American families,” MHI said in a published statement on Oct. 21 “If the proposed rule is finalized as written, it will eliminate manufactured housing as an affordable housing option for hundreds of thousands of potential homebuyers.
“The DOE proposal would dramatically increase the costs of manufactured homes, and in some areas of the country, will make the construction and transportation of homes nearly impossible. The proposal uses the 2021 International Energy Conservation Code, which was developed for commercial and site-built residential buildings and ignores all the construction aspects unique to manufactured housing.”
MHI and the industry collectively ask the energy department to recognize the HUD Code as a starting point for construction and safety standards of manufactured homes. Further, the advocacy group points to sections of the DOE changes outlined in its final rule that would work in opposition to the White House plan to close the housing gap in five years. Some of the energy changes would hinder production timelines, and increase cost to the homebuyer.
The U.S. Department of Housing and Urban Development has posted to the Federal Register a call for nomination to serve on the Manufactured Housing Consensus Committee, an advisory body made of industry professionals and at-large members.
“The MHCC expects to meet at least one to two times annually. Meetings may take place by conference call or in person. Members of the MHCC undertake additional work commitments on subcommittees and task forces regarding issues under deliberation,” the posting states.
The Manufactured Housing Consensus Committee
The Consensus Committee — more commonly known as the Manufactured Housing Consensus Committee or MHCC — is a federal advisory committee that provides recommendations to HUD regarding the adoption, revision, and interpretation of the manufactured housing construction and safety standards and the procedural and enforcement regulations (more commonly referred to as the HUD Code), among other responsibilities. It effectively replaced the 1974 Act’s National Manufactured Home Advisory Council.
The MHCC is composed of 21 HUD-appointed voting members, none of whom can be federal government employees, and one non-voting member who represents HUD. The Program Administrator for the Office of Manufactured Housing Programs is HUD’s Designated Federal Official. To promote diverse perspectives, voting members are divided into three groups
(ii) Seven members who represent consumer interests, such as manufactured home residents or consumer organizations (Users)
(iii) Seven general interest and public official members (General Interest)
The Producers and Users are self-explanatory, and General Interest is less clear; while this group typically consists of representatives from the Primary Inspection Agencies and State Administrative Agencies, it can include other representatives, such as industry consultants and advisers. Further, to promote independence and prohibit collusion, the 2000 Improvement Act also introduced additional safeguards, including term limits, staggered terms, supermajority voting provisions, and a financial independence test and post-employment ban for some members.
The MHCC has established four subcommittees — the Regulatory Enforcement, Structure and Design, Technical Systems, and General Subcommittees — each responsible for different parts of the HUD Code. Proposals that require a more comprehensive review, such as technical changes to plumbing or electrical provisions, might be delegated to a subcommittee, which will then report back to the MHCC with recommendations.
TV personality Mackenzie McKee testifies on social media about how a Sarasota manufactured home community kept her close to her family and her work.
Mackenzie McKee, the TV personality and married mother of three, took to Instagram recently to share how pleased she and her family are in their new place, albeit a stopover for the “Teen Mom OG” star, at Sun-n-Fun RV Resort in Sarasota, Fla.
McKee, who is 27 now and was on the show 11 years ago, detailed her family’s journey of moving from Oklahoma to Florida and looking for a home. She said they were renting in the Sunshine State and awaiting pre-approval to buy a new home in Florida. They came to find a lease they thought they could extend would be ending, and the family would need to move in 30 days.
“The market is crazy,” she said. “I was told that and I’m like we’re going to be homeless in 30 days.”
The family put their home in Oklahoma on the market and it sold in five days. The hunt for a place to rent was going nowhere, with only the promise of great expense and a lot of hours commuting to work and school.
That’s when another parent at the kids’ school mentioned the area manufactured home community operated by Michigan-based Sun Communities, a national provider of residential communities and RV resorts. The community’s name recently changed to Sun Outdoor Sarasota, but hangs on to its traditional signage and is known by many as Fun-n-Sun.
“I called them, they had one trailer available and I’m like this is my only option… ‘Sold! Here’s my debit card.’ I didn’t know what to expect.
“We pulled up after 18 hours of driving, and, honestly guys, this place is awesome,” McKee said.
“They have a huge pool! Pool parties… did I just spit?” she said.
Is spittin’ happy a thing now?
Seriously, the Sarasota manufactured home community provided the perfect solution for McKee and her family, as it does for so many others. And while the TV personality and her clan have a move-in date for a new home nearby, McKee said she would consider Sun-n-Fun in the future.
“It’s like a vacation spot and it’s super fun,” she said.
Kentucky Expo Center is the venue for the 2023 Louisville Manufactured Housing Show Jan. 18-20. Industry professionals only.
The Louisville Manufactured Housing Show, the Midwest’s premier event for manufactured housing professionals, previously scheduled for Jan. 19-21, has been postponed to 2023.
Hosted in Louisville for more than 60 years, The Louisville Show has featured the latest lineup of new homes, products and services for manufactured housing professionals looking for the greatest innovations the industry has to offer.
The event is organized and presented annually by the Midwest Manufactured Housing Federation, which represents the states of Illinois, Indiana, Kentucky, Michigan, and Ohio.
“The Louisville Show is traditionally the year’s first major opportunity to browse these homes before the spring buying season kicks into full gear, and we’re proud to be a part of it,” Kreil Moran, chairman of the Midwest Manufactured Housing Federation, said. “We’re excited to welcome manufactured housing professionals to Louisville in 2023 to view the newest model homes and industry innovations on display.”
Despite the ongoing COVID-19 pandemic, and on top of record demand for manufacturers and suppliers in the industry, Show Chairman Byron Stroud is dedicated to starting 2023 off strong with The Louisville Show.
“The health and well-being of our attendees and exhibitors remains our top priority,” Stroud said. “When The Louisville Show returns in 2023, we’re looking forward to welcoming the industry back into our doors for the largest indoor manufactured housing show in the U.S.”
Stroud added that upon the event’s 2023 return, The Louisville Show would adhere to all CDC and local guidelines that are in place at that time.
The 2023 event once again will take place at the Kentucky Exposition Center in Louisville, Ky., where industry professionals can view dozens of the latest model homes from the top manufacturers in the industry ahead of the busy spring and summer buying seasons.
Exhibitor Opportunities Open Soon For 2023
Exhibit space is expected to sell out fast for the 2023 event. Join the mailing list to keep up on the latest event updates, including reminders on deadlines for sponsorships, exhibitor registration, and activities. Registration and exhibition details for the 2023 event will be announced in the coming months. Any exhibitors with questions relating to the postponed 2022 event or the upcoming 2023 event can visit www.thelouisvilleshow.com for more information.
Paul Barretto, MHInitiatives and ManufacturedHomes.com.
What is the Secondary Mortgage Market?
Have you ever wondered how home lending works? Most of us are familiar with going to our local bank, credit union, or financial institution to take out a loan to buy or refinance our home but have you ever thought about how your lender goes about providing you the funds? When you finance your home, you and your lender are doing business in what’s considered the primary mortgage market.
The secondary mortgage market is where banks, credit unions, other financial institutions, and investors trade their mortgages, servicing rights, and mortgage-backed securities. Most lenders sell their mortgages to raise money to run their lending business. The secondary market defines how we get a mortgage loan, the interest rates and loan terms, and standards we must meet.
The Secondary Mortgage Market Makes American Housing
In the early 1900s, loans to buy a home were 3- or 5-year adjustable-rate balloon mortgages, which meant you paid interest for those first three to five years and then paid the full amount of the loan. Your options were either pay your lender for the remaining loan amount in cash or refinance your home into another balloon mortgage. In those days all of lending was local, meaning the interest rates, loan terms, and source of money was specific to where you lived.
When our country went through the Great Depression, nearly one in four homeowners lost their homes to foreclosure as they couldn’t pay for their mortgage loans without a job. Lenders stopped offering mortgage loans as they didn’t have any money to lend. This created a national housing crisis and had a damaging effect on the economy. In 1938, Congress created the secondary mortgage market when they formed the Federal National Mortgage Association, also known as Fannie Mae. Its sole purpose was to buy mortgage loans from the Federal Housing Administration and the Veterans Administration (VA). This allowed lenders to offer mortgage loans to their borrowers regardless of the economic environment, make money, and pass the risk of non-payment to Fannie Mae. This arrangement created a reliable, steady source of funding for housing and introduced long-term fixed-rate mortgage loans, national interest rates, and affordable housing programs.
In 1968, Congress converted Fannie Mae to a privately-owned, government-chartered corporation limiting its purchase of mortgage loans to conventional mortgages, FHA and VA loans. It also created the Government National Mortgage Association (Ginnie Mae) as a government agency that buys mortgage loans from other government agencies such as FHA, VA and USDA/Rural Development. In 1970, the Federal Home Loan Corporation (Freddie Mac) was created to buy conventional, FHA and VA loans like Fannie Mae to boost competition in the secondary mortgage market. Today, Fannie Mae and Freddie Mac are the largest buyers of conventional mortgage loans, which can be as high as $548,250 for a single-family home in 2021. The loan limits can change annually.
In 2008, we experienced the Great Recession which was our generation’s version of the Great Depression. While the housing industry suffered greatly, our nation managed through it because of the secondary mortgage market’s ability to serve the U.S. housing market. The secondary mortgage market was also instrumental in the recovery of the U.S. economy thanks to the mortgage-backed security.
It’s All About Mortgage-Backed Securities (MBS)
A major innovation that transformed the secondary mortgage market in the United States also happened in 1968 with the creation of the residential mortgage-backed security or MBS. An MBS is a bond made up of home loans. What makes MBS an important part of the secondary mortgage market and the U.S. housing market is the ability to offer investors a guaranteed payment of principal and interest throughout the term of the bond. The consistent, predictable, payment and uniformity of the loans backed by housing in the U.S. is guaranteed by Ginnie Mae, Fannie Mae, or Freddie Mac. In 2020, Ginnie Mae issued $450 Billion in MBS, and Fannie Mae and Freddie Mac issued $3.3 Trillion in MBS.
While creating access to mortgage loans despite the economic environment is the purpose of the secondary mortgage market, the Federal Reserve, or “the Fed”, uses MBS as a tool for economic recovery. By purchasing MBS in large quantities, they can keep mortgage interest rates very low. For example, 30-year fixed-rate loans remain below 3%. Buying MBS and other bonds to keep borrowing rates for housing and other loans was a key part of the Quantitative Easing strategy used to help our country recover from the Great Recession. In March 2020, the Fed began buying MBS again to support the economy through the COVID-19 pandemic.
Making Manufactured Housing Great Again Through The Secondary Mortgage Market
As the consumer market begins to understand the value of today’s manufactured homes, the opportunity and potential for manufactured housing is unprecedented because of the growing housing gap in our country. Traditional site-built home construction is not the answer as manufactured housing is more efficient and scalable in its ability to produce quality homes with less waste and at a more affordable price. The U.S. secondary mortgage market gives the manufactured housing industry the ability to scale its growth. Ginnie Mae, Fannie Mae, and Freddie Mac have no limits on the amount of loans they can buy, and they want to buy as much as they can. They are working with the industry to have more of their lenders sell them manufactured home loans.
However, to take advantage of this opportunity, the manufactured housing industry needs to evolve and transform by growing its land and home, or real property business attracting the homebuying population priced out of new and existing site-built homes. While we are already seeing innovative approaches to expand the market, such as retailers and lenders partnering with developers and city planners to build and expand subdivisions, there’s still a long way to go.
Paul Barretto is the Executive Director for LearnMH where he is responsible for the organization’s growth and strategic development as a resource for positive change in the offsite factory-built housing industry. He is recognized as an influencer in factory-built housing and authored Fannie Mae’s first Manufactured Housing market plan for the Duty to Serve.
Donald Layton, Joint Center for Housing Studies of Harvard University
Among the thousands of statistics that the government produces to describe the country’s economic and social health, the homeownership rate has an exalted place among policymakers in Washington. This single statistic – currently running about 65% – is regarded as one of the most important comprehensive measures of how well the country’s socioeconomic system is “delivering the goods” for the typical American family. A high homeownership rate reflects that many families have income large enough not only to cover monthly living costs but also to generate enough cash surplus to save for a downpayment and then to sustain homeownership. It also indicates that the cost of purchasing a house and financing a mortgage on it is affordable.
In addition, homeownership is regarded as causing an improvement in the quality of life of a typical family. It is the most common method for such a family to build wealth: by paying down mortgage principal each month and participating in the long-term appreciation of home values, a family can build net worth that can be used for retirement or other needs, including helping the next generation.
Such wealth creation, therefore, provides a major social as well as an economic benefit. Add in protection against being forced to relocate by a landlord due to unaffordable rent increases or other actions, and homeownership is validly seen as a source of family stability.
Not surprisingly, politicians and policymakers are therefore often focused on finding ways to sustainably push the homeownership rate higher. As a participant in the housing finance policy community since 2012, when I became CEO of Freddie Mac, I have heard often how crucial housing finance was in creating the much higher rate of homeownership that evolved after World War II – roughly 65%, compared to less than 50% prior to the Great Depression. I have also heard frequently from housing advocates how a specific proposed change in housing finance would result in many more families (the phrase “millions” is sometimes used) becoming homeowners. Astonishingly, despite such claims, through decades of the government implementing various programs in housing finance aimed at increasing the sustainable rate of homeownership, it remains today at almost exactly the level achieved over 50 years ago – about 65%.
It thus seems time to step back, take stock, and look for fresh ideas.
As such a step, my newly-published paper “The Homeownership Rate and Housing Finance Policy: Part 1 – Learning from the Rate’s History,” reviews the history of the U.S. homeownership rate over roughly the past 130 years to learn what policies will or will not work.
A summary of the history of home finance, as it is related in the full paper, is as follows:
The Pre-Depression Era: 1890-1930
The U.S. homeownership rate was at 46.5%, plus or minus 1.5%, from when records began to be kept in 1890 through to the end of the Roaring ‘20s four decades later. During this time, modern life began to take hold: the percentage of the population that was urban, rather than rural, went from 35% to 56% and the number of registered automobiles went from zero to almost 24 million. In fact, by 1930, seventy percent of American households were electrified to support the lightbulb, and then-modern electric marvels – such as the radio, record player, and telephone – were starting to become common in homes. Yet, despite this massive change in daily life, surprisingly the homeownership rate remained almost unchanged, Of course, as this was an era of small government, housing issues were largely left to market forces, so there was no government effort aimed at increasing the rate to 50% or more.
The Transition Era: 1930-1970
Through the early years of the Depression, more than one third of the country’s 25,000 banks disappeared and the unemployment rate rose to a staggering 25%. It is assumed the homeownership rate dropped during these years as well, but there is no readily available data to know for sure as the statistic was only collected every ten years via the census. However, by the 1940 census, the homeownership rate sat at 43.6%, down only about four percentage points from its 1930 level of 47.8%, despite the breadth of decline in other parts of the economy. The federal government, first under President Hoover but mainly then President Roosevelt, initiated massive government intervention efforts, including in housing and housing finance, to aid American families and to dig out of the Depression. In fact, there was a virtual revolution in how the mortgage system worked, with the creation of the “American” mortgage – with a long term (now 30 years), a fixed rate, full self-amortization, a loan-to-value ratio of 80% or more, and free prepayment at any time for any reason. Prior to 1930, the typical mortgage was for only 50% of a house’s value, the term was a maximum of 10 years, and there was little if any amortization. By 1940, of course, the country was starting wartime production, greatly aiding in the recovery.
After the war was won, the homeownership rate emerged at 53% in 1945, and then continued to climb to 60% in 1955, and on to better than 64% by 1969. This was totally unprecedented. The causes of this incredible achievement are many. The change to housing finance engineered during the 1930s played a major role, but there were other fundamental changes in American life that were significantly responsible as well. These included the GI Bill helping to create a much larger middle class, as well as the invention in the late 1940s of the modern suburbs that were, and still mostly are, centered around the ownership of the traditional single-family home.
The Modern Era: 1970 to Today
During the 50-year era beginning in 1970, the homeownership rate remained stable at around 65%, give or take 2 percentage points, echoing how it had not changed much in the forty years of 1890 to 1930. In fact, it started the era at 64.3% and ended up almost unchanged a full fifty years later at 65.3% when the pandemic hit. In the late ’90s the rate did increase to 67%, and then in the early 2000s nearly hit 70% – which was beginning to look like a sustainable increase beyond the 65% range. However, this at least in part reflected the early days of the mortgage bubble, and its bursting was so overwhelming that the homeownership rate then began a long-term decline. It eventually reached its bottom of 62.9% in April of 2016, a full ten years after the house price peak in 2006 and six to seven years after the end of the recession.
During this 50-year period, there were signature programs in housing finance that were designed to increase the homeownership rate, such as the Community Reinvestment Act and later the GSE obligation to meet certain “affordable goals.” Unfortunately, it is clear from the data that none of these programs moved the needle at a sizeable level, although they might have in smaller numbers.
A Foundation for Housing Policy
The objective of this Part 1 historical review is to establish a foundation for determining what policy choices, especially in the field of housing finance, would likely be successful in finally and sustainably raising the homeownership rate past the 65% range to 70% or even more – which will then be explored in Part 2.
It would indeed be a major socioeconomic success for the United States if the homeownership rate could rise to 70% or 75% on a sustainable basis: about 6 to 13 million more families (respectively) would become homeowners, with all the economic and social benefits that increase would generate. But, after so many programs designed to do just that have failed for the past half-century, it obviously isn’t an easy thing to accomplish – in fact, one inescapable conclusion from history is how incredibly hard it is. The stubborn racial homeownership rate gap also plays a prominent role in how to increase the aggregate rate, as will also be described in next part.
In particular, Part 2 will include an examination of the proposal made by the Biden campaign to establish a large and generous down payment assistance program with Federal government funding. In my view, that proposal, which represents a significant change in the thinking that has dominated policymaking for many years, does indeed have the potential to be a major component of a successful effort to, at long last, materially and sustainably raise the homeownership rate materially above its long-standing 65% level.
Don Layton is a senior industry fellow with the Joint Center for Housing Studies of Harvard University and previously served as CEO of Freddie Mac. He worked for nearly 30 years at JPMorgan Chase and its predecessors, starting as a trainee and retiring in 2004 as one of its top three executives. The full publication of his homeownership research can be found at www.jchs.harvard.edu.
Parke Place Estates in Elkhart, Ind., a UMH Properties community.
A Quarterly Review of Manufactured Housing Real Estate Investment Trusts
The research team at Hoya Capital Real Estate is excited to continue our quarterly column published in partnership with MHInsider to provide insight and commentary on publicly-traded manufactured housing stocks. Every quarter, we’ll publish an update to discuss the stock performance, earnings results, and major news and events reported by manufactured housing real estate investment trusts, or MH REITs.
Overview of MH REITs
There are three U.S. exchange-listed Manufactured Housing REITs which collectively account for roughly $40 billion in market value: Equity Lifestyle (ELS), Sun Communities (SUI), UMH Properties (UMH). Additionally, newly-listed Flagship Communities (FLGMP) trades on the Toronto Stock exchange.
Manufactured Housing REITs collectively own roughly 350,000 manufactured housing and RV sites across the United States with a portfolio skewed toward higher-end communities with a more “retiree-oriented” demographic than the all-ages community. Through a series of acquisitions, Equity Lifestyle and Sun Communities have recently expanded into boat marinas as well while the smaller UMH Properties and newly-listed Flagship Communities focus on traditional manufactured housing communities.
Through a series of acquisitions, Equity Lifestyle and Sun Communities have recently expanded into boat marinas as well while the smaller UMH Properties and newly-listed Flagship Communities focus on traditional manufactured housing communities.
Manufactured housing REITs have emerged over the past decade from relative obscurity into several of the largest publicly-traded owners of real estate in the world. Beneficiaries of the lingering housing shortage across the United States resulting from a decade of underbuilding, manufactured housing REITs have been the single-best performing REIT sector since the start of 2010, delivering an incredible 22% annual compound total returns from 2010 through 2020.
Third Quarter 2021 MH REITs Performance
MH REITs soared nearly 15% in the weeks following their stellar second-quarter earnings reports – and were briefly the second-best-performing REIT sector on the year – but have given up some of these gains in recent weeks given the recent concerns over rising rates and inflation.
Despite the roughly 10% correction from recent highs set in early September, MH REITs are still higher by 27.1% this year, still outpacing the 23.0% gains from the market-cap-weighted Vanguard Real Estate ETF (VNQ), and beating the 18.0% returns from the S&P 500 (SPY) and 18.0% gains from the Mid-Cap 400 (MDY).
Consistent with the trends across the residential REIT industry over the past quarter, MH REITs significantly boosted their growth outlook over the last quarter, citing strong rental housing demand and substantial upward rent pressure. Same-store Net Operating Income (“NOI”) growth continues to accelerate following a brief pandemic-related slowdown as property-level growth is now expected to rise by more than 9% for full-year 2021, up from the prior outlook which called for roughly 6% NOI growth.
Growth in funds from operations – the earnings per share “equivalent” for REITs – is driven by the combination of same-store “organic” growth and by external growth through acquisitions and new development. Forward guidance over the past quarter was particularly impressive as ELS and SUI project growth in Funds From Operations (“FFO”) of nearly 19% this year – up from their prior outlook of 14% growth last quarter – which would surely be one of the strongest growth rates in the REIT sector.
Utilizing a strong cost of equity capital, these REITs have continued to grow externally by adding units to existing sites and by growing via acquisitions and site expansions. MH REITs acquired just shy of $2 billion worth of properties over the last year, largely in one-off acquisitions while disposing of just $10 million in assets. The most significant deal in 2020 was Sun Communities’ $2.1B purchase of Safe Harbor Marinas, which owns and operates 101 institutional-quality boat marinas.
Manufactured Housing Industry Data Points
MH REITs’ amplified focus on analogous asset classes – RV parks and marinas – was perfectly-timed, providing an added external growth tailwind. “Work-From-Anywhere” has fueled soaring RV, boat, and vacation home sales. The RV Industry Association expects RV wholesale shipments to climb to their highest historical total ever. While the RV industry has faced similar supply chain issues as traditional homebuilders, the RVIA sees shipments rising to 577k units in 2021, which would be a 14.1% gain over the current comparable record high of 504,600 units in 2017.
The National Marine Manufacturers Association, meanwhile, reported that powerboat sales are also poised to set record-highs this year despite inventory levels that are “the leanest they’ve ever been.” With SUI’s major investment in Safe Harbor Marinas, these MH REITs are now the two largest owners of marinas in the United States, an asset class with nearly identical fundamental characteristics as their large portfolio of RV parks. Marinas offer substantial operating parallels to the company’s RV business and that there are roughly 4,500 marinas in the US, of which 500 would be considered “institutional quality.” Earlier this year, ELS also expanded its marina portfolio with a purchase of 11 marinas, containing 3,986 slips, for $262.0 million.
MH REITs Key Takeaways
Low supply and strong demand have driven stellar fundamental performance for MH REITs over the past half-decade, and the MH sector continues to deliver sector-leading NOI and FFO growth. Consistent with the trends across the residential REIT sectors over the past quarter MH REITs significantly raised their growth outlook, citing strong rental housing demand and substantial upward rent pressure. Despite reporting stellar results throughout the year, manufactured housing REITs’ remarkable streak of eight straight years of outperformance over the REIT Index will come down to the wire in 2021 as the sector has been pressured over the past month by concerns over rising rates, inflation, and the broader rotation from growth into value.
“Beneficiaries of the lingering housing shortage – creating a compelling backdrop for companies across the housing industry – we believe that the recent pull-back could represent the long-awaited buying opportunity for these dividend growth champions.”
— Hoya Capital
MH Earnings Reports
Looking ahead, MH REIT earnings season kicks off on Oct. 18 with results from Equity Lifestyle. Over the subsequent three weeks, we’ll hear results from Sun Communities, UMH Properties, and Flagship Communities, in that order.
MH REITs REPORT Terms Defined
FFO (Funds From Operations): The most commonly accepted and reported measure of REIT operating performance. Equal to a REIT’s net income, excluding gains or losses from sales of property and adding back real estate depreciation.
AFFO (Adjusted Funds From Operations): A non-standardized measurement of recurring/normalized FFO after deducting capital improvement funding and adjusting for “straight line” rents.
NOI (Net Operating Income): Typically reported on a “same-store” comparable basis, NOI is a calculation used to analyze the property-level profitability of real estate portfolios. NOI equals all revenue from the property, minus all reasonably necessary operating expenses.
Hoya Capital Disclosures
I am/we are long ELS and SUI. I am not receiving compensation for it. It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Nothing on this site nor any published commentary by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and should not be considered a complete discussion of all factors and risks. A complete discussion of important disclosures is available on our website www.HoyaCapital.com.
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